Insurance Broker Willis To Buy Rival for $1.7 billion

Willis Group Holdings, the world's third largest insurance brokerage, has agreed to buy rival Hilb Rogal & Hobbs for $1.7 billion, according to a statement late on Sunday.

Under the agreement, Willis will acquire all of HRH's outstanding shares in a cash and stock deal valued at $46 per share. The offer price represents nearly a 50 percent premium to HRH's closing price of $30.89 a share on Friday.

The deal includes $400 million in debt and is expected to close in the fourth quarter.

Willis, which is domiciled in Bermuda and has large headquarters in New York and London, sees the acquisition adding to cash earnings per share from the time the purchase is closed, and sees annualized cost savings of about $140 million by 2012.

Willis said the deal with HRH, a middle market insurance broker, will help it expand its footprint in North America, and post-merger the group will beknown as Willis HRH in North America.

Willis' acquisition of Richmond, Virginia-based HRH is the largest transaction for this industry since biggest rival Marsh & McLennan's 1998 acquisition of Sedgwick Group.